January US Light crude futures in Asia were up 11 cents at $26.55 per barrel at 0810 GMT, working back towards Monday's $27.15, which was the highest level traded since the Gulf War.

Bullish data from the American Petroleum Institute (API) offset any lingering worries that Iraq's spat with the United Nations could soon be over. Prices fell on Tuesday on signals that Iraq would accept a normal 180-day rollover of the six-month oil-for-food deal which would put Iraqi oil exports back on track.

Iraq stopped exports earlier this week in protest at what it saw as a US attempt to prolong sanctions imposed by the United Nations after Baghdad's 1990 invasion of Kuwait.

Iraqi worries were pushed to the background on news that stocks in the United States - the world's biggest oil consumer - were falling. API said crude stocks in the week ended November 19 fell l2.07 million barrels, within market expectations, but distillates fell a bigger than expected 3.5 million barrels.

Gasoline stocks surprisingly rose, but traders said the overall data was bullish. With stocks falling, the world's biggest exporter Saudi Arabia warned that it remained determined to keep a rein on output until the end of March.

A Gulf source familiar with the kingdom's oil policies said Saudi Arabia believed speculation was behind the oil price rally to nine-year highs this week. At $27.15 per barrel, US Light crude futures were 162 per cent higher than the 12-year low of $10.35 per barrel late last year. Prices remain buoyant in the expectation that stocks are falling rapidly at a period when global demand reaches a seasonal peak heading into the northern hemisphere winter.